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Inflation in Germany: prices rise much slower in August


Especially vegetables are becoming increasingly expensive in Germany, but the prices of other products and services are rising much slower than expected.

Energy prices have risen only slightly recently, which dampened inflation in Germany in August. The annual inflation rate was 1.4 percent, the Federal Statistical Office said on the basis of preliminary data. In the months before June and July, the rate had been 1.6 and 1.7 percent, respectively.

Energy prices rose only 0.6 percent rose. On the other hand, consumers had to pay considerably more than in the same month of the previous year (plus 2.7 percent). Vegetables in particular became more expensive, according to data from the state statistical offices. For example, the greenery in North Rhine-Westphalia cost 13.8 percent more than a year ago. In Bavaria it was 14.6 percent and in Hesse twelve percent more.

"There are many reasons for this, and prices are influenced by factors such as demand and weather," says Hans-Dieter Stallknecht, speaker at the German Farmers' Association. Significantly more expensive, according to the information tomatoes and peppers, which come for the most part from Spain and the Netherlands. "In the process, the increased demand due to the heat may have played a role, but white and red cabbage are more of a shelf-warmer in terms of temperatures," said Stallknecht.

The inflation rate is an important indicator of the monetary policy of the European Central Bank (ECB). The central bank is aiming for a medium-term annual inflation rate of just under 2.0 percent for the eurozone - far enough away from the zero mark. Persistently low or broadly falling prices can lead companies and consumers to postpone investment. That slows down the economy.

ECB could intervene

In the euro area as a whole, inflation had recently weakened perceptibly. According to the latest data released by the Statistical Office Eurostat, the annual inflation rate dropped to one percent in July. As a result, inflation has not been so high since November 2016.

In the face of gloomy economic prospects and weak inflation, Europe's monetary authorities recently hinted at further easing of monetary policy. Initial decisions are expected to be made by the ECB at the September Council meeting.

In order to stimulate lending and thus inflation in the euro area, the ECB could tighten the penalty rate for banks. At present, credit institutions have to pay 0.4 percent interest if they deposit money with the central bank. Another option could be the ECB buying more bonds.

Source: spiegel

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